Shares originally transferred as RMD uncovered on sale

Forum|Forum|3 years ago
February 25, 2023
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On 12/29/22, I sold all my shares of a mutual fund. They were composed of shares transferred (RMD) from my IRA on 12/19/21, reinvested dividends/capital gain distributions, and shares transferred (RMD) from my IRA 12/22/22.

My 1099-B shows all the reinvested shares as Box A/short-term covered, and the 2 lots of RMD transfers as uncovered, cost and holding period unknown, for me to enter in Box B/short-term uncovered or Box E/long-term uncovered. On my December 2022 broker statement, Schedule of Realized Gains and Losses Year-to-Date, those 2 lots are shown with their correct Date Acquired and Cost Basis and appropriately placed in their Short Term/Long Term categories, but with the "Designation" column saying "Uncovered."

I've looked in the appropriate IRS pubs and tried Google but cannot find an explanation for why these 2 lots are considered uncovered. My broker does not know. It doesn't really matter, but I am curious. Does anyone here know why?

Mike9241

"Non-covered" securities are any securities purchased or acquired before the effective dates ranging from 2011 to 2014 depending on how acquired. Transactions involving assets purchased and held prior to these effective dates can still be reported as they have been in the past, meaning that brokers may not provide detailed cost basis reporting to the IRS on the sales of "non-covered" securities. They may decide to report only your gross proceeds. For these situations, it is your responsibility to report the proper cost basis on non-covered securities to the IRS.

bbjaspanAuthor

Right, I understand all that. But these non-covered shares were acquired, as I explained, in 2021 and 2022 when they were transferred from my IRA as Required Minimum Distributions (RMDs). Their holding period begins on the date of the distribution and their cost basis is their value on the date of the distribution. Why does the 1099-B categorize them as non-covered?